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Sunday, October 5, 2014

How Low Can Crude Oil Go?

Our trading partner Mike Seery is laying out his bearish view on crude oil. How low can it go?Crude oil futures in the November contract are down $1.50 a barrel currently trading at 89.53 right near two year lows with extreme choppiness over the last several weeks with many rallies and sell offs as I’ve been sitting on the sidelines but now the trend clearly is to the downside, however the chart structure is terrible at the current time so I am not taking a short at this time, however if you are interested in selling this market I would sell a futures contract at today’s price of 89.53 while placing my stop above $95 risking around $5,500 per contract.

The chart structure is very poor as volatility is extremely high but I am certainly not recommending anybody to buy this market as I do think prices are headed lower and if the chart structure improves in the next couple of days I will take a shot at the downside as we are awash in supplies worldwide plus the fact that the U.S dollar hit 2 year highs today as I see oil prices possibly heading down to the $80 level here in the next couple of months due to the fact of low demand and the fact that many of the commodity markets continue bearish trends as deflation is a problem not inflation.

The fact that prices are not rallying with havoc over in the mid East as oil used to rally sharply on problems in the Middle East but now the U.S is an exporter of oil so these ISIS events are not as important as they used to be so continue to sell any type of rally while placing your stop loss properly risking 2% of your account balance on any given trade.